HTSC·2026-01-23 02:25Investment Rating - The industry investment rating is "Overweight" for both the construction and building materials sectors [6]. Core Insights - The report emphasizes the importance of balanced allocation between traditional cyclical building materials and emerging technology growth opportunities, driven by supportive real estate policies aimed at stabilizing the market [1]. - The path for resolving real estate debt is becoming clearer, with significant credit impairment already reflected in the consumption building materials sector, suggesting a narrowing of credit impairment risk exposure [2]. - The decline in real estate construction is expected to slow, with price increases for construction materials continuing, particularly benefiting leading companies in the sector [3]. - The second-hand housing market is showing signs of stabilization, with "stock renovation" expected to be a key theme in 2026, potentially boosting demand for decorative and functional building materials [4]. Summary by Sections Real Estate Policy and Market Outlook - The Ministry of Housing and Urban-Rural Development is focusing on stabilizing the real estate market through targeted policies, which is expected to accelerate the recovery of the sector [1]. - Data indicates that the real estate market is beginning to stabilize, with some companies showing signs of revenue improvement due to increased market share and expansion into overseas markets [1]. Credit Impairment and Debt Resolution - Vanke's recent bondholder meeting approved a significant extension plan, indicating a rational approach to debt resolution within the industry [2]. - Most building materials companies have already accounted for substantial credit impairments, with many reporting over 50% impairment on specific items [2]. Construction Activity and Material Pricing - Real estate sales, new construction, and completion areas have shown declines of 8.7%, 20.4%, and 18.1% year-on-year, respectively, but the rate of decline is expected to slow [3]. - Leading companies in the sector have begun to implement price increases for construction materials, indicating a potential turning point in the market [3]. Second-Hand Housing Market and Renovation Demand - The retail sales of construction and decoration materials reached 167.1 billion yuan in 2025, reflecting a decline of 2.7% year-on-year, primarily due to high base effects from previous quarters [4]. - The report notes a decrease in the listing volume of second-hand homes, suggesting a tightening supply that could lead to price improvements [4]. Recommended Companies - The report recommends several companies for investment, including: - China Liansu (2128 HK) with a target price of 6.35 yuan - Weixing New Materials (002372 CH) with a target price of 14.34 yuan - Rabbit Baby (002043 CH) with a target price of 16.01 yuan - Beixin Building Materials (000786 CH) with a target price of 29.64 yuan - Dongfang Yuhong (002271 CH) with a target price of 17.19 yuan [7][9].